All Forum Posts by: Brad G.

I'm FI and my wife just RE but I will probably work another 2-3 years. I have punched a clock for 20 years and my wife has been in the insurance business. We started building and leasing commercial buildings in 2007 and now have 3 buildings with 6 units that provide our passive income. We also have 401ks, Roths, Life ins policies, a post tax equities investment account and an HSA. My wife and her father are very good with money and frugal. They showed me the way and I self educated by reading everything I could get my hands on and by learning from mentors. I am very grateful for all the help and knowledge that has been so freely given to me over the years.

Brad

I just wanted to follow up on this post. We signed a lease on this property yesterday. I offered the broker 4% upfront, nothing on the back end and raised the monthly rent to recoup the cost of the brokerage fee plus interest over the term of the lease (I am not in the banking business but if I must loan money I won't do it for free). I contacted the regional manager and explained to him why the rent had increased from what I had told him in our discussions and he was fine with it but glad for my clarification.

 So in the end it urned out OK and I learned a lot from the experience and from all of you fine folks here. Thanks again!

Funny that you mention that. I called the sales rep shortly after the broker called me and I told him that very thing. He was very understanding and he gave me his boss's contact info and told me to contact him if I needed to.

 As of now I have not heard from the broker since my offer this morning.

Brad

Cara, you are correct.

The sales rep told his boss that he needed a warehouse space. His boss told him to find one and bring him the details. The sales rep saw my ad and contacted me. I showed him the property and we discussed rent, length of lease etc etc. I gave him my best deal because I wanted his business - having no idea that I would have to pay someone working for his company.  He told me up front that his boss would make the final decision on the property so I expected to go over the final lease with him. 

 I have a current lease in another property with a large international corporation and the whole deal was made between myself and a regional manager. No broker needed nor involved.

Imagine that you were selling a car. A buyer contacted you, asked questions and test drove it. You like the guy and offer him your very best price. He said he liked it and that his wife would make the final decision. Now you get a phone call from another guy who tells you that he represents the wife and that she wants to buy the car for the agreed upon price. Great! Then he tells you that you will need to pay him 6 percent. WTF??? 

I understand that I may lose the deal. I offer quality property at a good price. There is high demand here and not much inventory. It won't bankrupt me. 

If I had to do it over I would handle it differently thanks to all of your help and information but I would still feel like the broker was inserting himself into a situation where he hadn't added any value and I would pay him but add his fee plus interest into the lease. (If this deal goes through that's how it will be as well)

Brad

The broker has not added any value to this situation. He didn't bring the tenant, the tenant found me via a Craigslist ad, contacted and met with me twice in addition to multiple phone calls. I am not trying to get anything for free but I expect something for my money. The reality is that he is not providing any value for me and he is going to cost his client more money because I am going to raise the cost of the lease to pay his fee. So, it's a lose lose for the landlord and tenant and only the broker wins.

 Thank you all for your responses and opinions. I am learning a lot.

Brad

 Check my state... are you saying it's state law determining who pays?

thanks

Brad

I have a commercial rental unit that I showed to, and have been in discussion with, a regional sales rep of a large corp who is needing some warehouse space. I am a small minnow in the ocean of commercial property and generally rent to local small business owners. He finally got approval to lease the unit from his supervisor. Today I got a call from a broker who was representing the corp. This caught me off guard because it hadn't been mentioned to me previously that a broker would be involved BUT I have been reading bigger pockets and studying the processes, terms and lingo so I recovered myself quickly and began answering his questions about rent, length of lease, terms etc. The negotiations for the lease had pretty much already been agreed to by myself and the company sales rep so there wasn't much to discuss. At the end of the call he brings up his 6% commission on the lease and tells me that I will need to pay that. RED FLAGS start going off and I said that I hadn't hired him and I didn't feel I should pay him. He mentioned that I could pay it upfront and then add it to the rents over the term of the lease so that the tenant would pay it back but I am not really comfortable with that because I gave someone my word on a monthly rent price and that would contradict what I promised.

 Long story short this didn't feel honorable to me - him coming in at the end of a deal and asking me to pay his commission after all the work was already done. I told him I would get back with him after talking to my partner, which I did. I simply told him that we were not willing to pay his commission and that the corp he was representing would have to pay for his services. I really want them as a tenant but and I hope it doesn't throw a wrench in the deal.

Any thoughts? Is this common or were my instincts correct???

Thanks

Brad

I started in commercial and have stayed. I have been tempted by some residential deals from time to time but always talk myself out of it because for me the advantages of TRUE commercial (businesses not multifamily residential) real estate have spoiled me! I now have three 5000 sq ft metal buildings with 6 rental units and they (along with good sense personal finance) have given me financial independance. Consider the types of businesses that will always need physical space - plumbers, elctricians, cabinet makers, mechanics, welders, artisans, small manufacturers, EMS services etc. My advice would be to pretend you are looking for that type of space to rent and see what you can find in your area. That should give you an idea of supply vs demand. Every investor and market is different but that is my experience of the last 12 years.